Shell Considers $2 Billion Oilsands Debottleneck, West Coast LNG Plant
By Lynda Harrison
22 March 2011
The Daily Oil Bulletin English
(c)2011 copyright Junewarren-Nickle’s Energy Group. All rights reserved
Now that the Scotford expansion is nearly complete, the next focus at Royal Dutch Shell plc's Athabasca Oil Sands Project (AOSP) is optimization and debottlenecking.
Shell is aiming for a 2011 final investment decision on a $2 billion (all figures in U.S. dollars) debottlenecking project at the AOSP which will add 35,000 bbls per day with a net present value break-even of around $45 per bbl, or about $30 less than a full expansion. The company expects to do a series of these debottlenecking projects over the next decade. The AOSP is 60 per cent owned by Shell, the operator.
The majority of new production at the Athabasca Oil Sands Project is now going through the Scotford upgrader and probably by the second quarter the 100,000 bbls-per day expansion and addition of a third processing train will be up and running, bringing output to 255,000 bbls per day, said Lorraine Mitchelmore, Shell Canada Ltd.'s president and country chair.
"We've been going through this process since September," Mitchelmore told reporters following a celebration marking the company's 100th anniversary in Canada (DOB, March 21, 2011). She declined to provide the upgrader's current capacity.
The new Jackpine mine is being combined with output from the previously existing Muskeg River Mine, both feeding the expanded Scotford upgrader. Once it is fully onstream, oilsands mining will be about four per cent of Shell's worldwide oil and gas production.
Shell is also looking into carbon capture and storage for the AOSP, in a project called Quest, which could capture and store some one million tonnes of carbon dioxide per year, and plans to make the final investment decision in 2012 (DOB, Dec. 1, 2010).
Mitchelmore said Shell Canada is considering a liquefied natural gas (LNG) plant at Prince Rupert on the west coast. "We're always looking at opportunities and of course the gas market has really changed over the last few years with shale gas and so for us the opportunity to export - and we're the world's largest LNG producer -- so of course we'd be looking at that."
Simon Henry, Royal Dutch Shell's chief financial analysts, told analysts in London, England last week the company made good progress on tight gas in North America in 2010.
Shell increased its resource potential by some 20 tcf in 2010, by drilling acreage and through new deals, and grew production by 21 per cent.
It has some seven billion bbls of oil equivalent of potential resources, with 12,000 drilling locations over 2.2 million acres of core contiguous positions.
All this has been put together with a series of farm-ins, joint ventures and small acquisitions, at a competitive entry cost of 40 cents per mcf, or less than $3 per BOE, said Henry.
Over the next four years, Shell expects to invest up to $5 billion in heavy oil, at least $12 billion in each of tight gas and global explorations and around $20 billion each in traditional upstream, in deep water projects and in integrated gas.
Mitchelmore told reporters Canada needs a national approach to its energy policy to position it in the global marketplace. "This is about wealth creation and taking what Canada has as its competitive advantage and turning it into an economic advantage for the future," she told
reporters, adding Canada has the resources and a deep commitment to the environment.
"You bring these two together and really create a framework that allows us to compete internationally. That is what this is about."
She said Shell is taking this message to all Canadians, including producers, end users, First
Nations, government and regulators, starting with an "educated dialogue."
According to Mitchelmore, customers are demanding energy with a reduced carbon footprint so Canada needs to put a price on carbon.
"I can't say what a fair price on carbon would be because there are so many factors involved in that," she said. "What we need to do, though, is provide affordable energy. We need to think about innovation and technology. You put a price on carbon right now, it's going to make energy too expensive so you need to then bring in innovation and technology to incent companies to innovate.
That's why I say it's quite complicated."
Shell Canada internally prices carbon because it believes there will be a carbon price in the future but does not know what that price will be.
Being in Canada for 100 years, Shell expects future energy production will be less carbon intensive than it is today so Canada needs to position itself now, said Mitchelmore.
"To be a 100-year-old company you have to adapt. To be a country that sets itself for the future, it's about adaption. We have one of the best regulatory systems in the world, but it needs adaption to what's the future and that's what it's about. It's about adapting to the future."
Shell Canada had its beginnings in this country with the establishment on March 21, 1911 of the Longue Pointe Bunkering Plant and gasoline tankage facility in Montreal. It had six employees and capital of $50,000, worth about $1 million today.
It opened its first service station in Canada in 1925 on Montreal's Sherbrooke Street.
Shell had many firsts: in 1919 it fuelled the first west to east trans-Atlantic flight, from Newfoundland to Ireland. In 1953 it became the first Canadian oil company to produce chemicals from petroleum and in 1958 it introduced the first tunnel car washes to Canada. In 1968, it was
the first major oil company to open self-serve gas stations in Canada and in 1970 it was the fist Canadian company to remove lead from gasoline.